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QuadReal pushes exposure in Australia via ARA JV

The BCIMC-owned firm will refrain from investing in retail assets directly, opting to gain access to consumer activity through logistics investments instead.

QuadReal, the real estate investment arm of Canadian state pension plan British Columbia Investment Management Corporation, has continued to boost its exposure in Australia with the purchase of an office building in Melbourne.

The investor acquired 200 Victoria Parade in East Melbourne for A$328 million ($216 million; €197 million) via a programmatic joint venture with Singapore-headquartered manager ARA asset management. This is the first investment of the venture set up by the pair to invest in office and logistics assets in Sydney and Melbourne over the next three years.

Peter Kim, managing director of Asia for QuadReal, told PERE the firm had been growing its exposure to Australian real estate since it was established in 2016.

This latest acquisition brings QuadReal’s assets under management in Australia close to C$1 billion ($750 million; €685 million), representing less than 5 percent of the firm’s C$37.6 billion global portfolio, according to Kim.

QuadReal’s portfolio grew significantly to C$37.6 billion due to the takeover of BCI’s mortgage business in mid 2019.

“In Australia we typically like buy-fix-sell strategies where we can add value through repositioning, taking on leasing risk or undergoing material renovations to seek our returns,” said Kim. In line with the strategy, the JV with ARA focuses on value-add investments and is expected to generate returns in the low-teens.

The investor plans to continue to seek opportunities in the office and logistics sectors in the country. In addition, multifamily investments could feature, but he pointed out the sector does not yet exist as an institutional asset class in the country.

“With multifamily, I think it’s too soon to tell how big the opportunity is in Australia. Australia has a very large private rental sector, and yet the sector is very opaque. For a true institutional multifamily market to emerge in Australia, a number of changes need to happen. And tax is one of the major issues for foreign investors at the moment,” Kim commented.

The investor also remains cautious about the traditional retail sector amid the headwinds. “We are refraining from investing in retail directly; we prefer to gain exposure to retail through our investments in logistics,” said Kim. He added that QuadReal does not have any direct retail exposure in Australia.